- The UK reform bringing unused pension funds into the inheritance tax net is now confirmed law (Finance Act 2026, Royal Assent 18 March 2026), taking effect for deaths on or after 6 April 2027
- Spousal and civil partner transfers remain exempt; the government estimates around 10,500 additional UK estates will become liable
- For French residents, this collides with France's own succession tax, which taxes worldwide inherited assets based on the heir's French residency — separately from the UK's rules
- The 1963 UK-France estate tax treaty provides a credit mechanism, but it's built around a concept of "domicile" the UK abolished for tax purposes in April 2025 — how it applies to inherited pensions specifically is a genuinely open question right now
If you've seen headlines about UK pensions losing their inheritance tax protection, this isn't speculation anymore — it's law. What's less widely reported is the extra layer this creates for anyone retired in France with UK pension wealth, where two countries' inheritance rules can now both take an interest in the same pension pot.
What's Actually Changed
From 6 April 2027, most unused UK pension funds and death benefits will be brought into the value of the deceased's estate for UK Inheritance Tax purposes. Until now, pensions have generally sat outside the estate entirely, which is part of why they've long been used as a wealth-transfer tool as much as a retirement one.
This is confirmed under the Finance Act 2026, which received Royal Assent in March 2026. Transfers to a surviving spouse or civil partner remain fully exempt, mirroring the existing IHT spousal exemption. The government's own estimate is that around 10,500 UK estates that currently pay no inheritance tax at all will become liable purely because of this change.
Where beneficiaries aren't a spouse, and the pension holder dies aged 75 or over, the pension can face both the 40% IHT charge and income tax on withdrawal at the beneficiary's own marginal rate — producing a combined effective rate that's commonly cited in the 52% to 67% range, depending on the beneficiary's tax bracket. Our SIPPs vs Assurance Vie guide covers this comparison, and what it means for planning, in more depth.
The Impact on French Residents
France taxes inheritance differently from the UK. Rather than taxing the deceased's estate as a whole, French succession tax (droits de succession) is paid by each individual heir, and it applies to worldwide inherited assets if the heir has been a French tax resident for at least 6 of the 10 years before the inheritance (Article 750 ter of the French tax code) — regardless of where the deceased lived, and regardless of where the asset itself is situated.
That means a UK pension, newly caught by UK inheritance tax based on the deceased's UK domicile status, could simultaneously be pulled into French succession tax based on the heir's French residency. Two different countries, two different triggers, potentially the same pot of money.
Does the 1963 Treaty Prevent Double Taxation Here?
There is a relevant treaty — the UK-France Convention for the Avoidance of Double Taxation on Estates, signed in 1963 and still in force. It works by identifying which country the deceased was "domiciled" in under the treaty's own tests, giving that country primary taxing rights over the worldwide estate, and having it credit tax paid to the other country on assets situated there.
The complication is that this treaty was built entirely around the classic UK concept of domicile — and the UK abolished domicile as the basis for inheritance tax from 6 April 2025, replacing it with a "long-term UK residence" test instead. GOV.UK's own guidance on double taxation relief confirms that treaties predating this change, including the French one, don't include provision for the new test.
Pensions have never been part of a UK estate before, so there's no established precedent yet for how the treaty's situs and credit rules apply to an inherited pension specifically, or how the old domicile-based treaty language interacts with the UK's new residence-based test. This is a genuinely open question. Anyone in this position should be getting advice from both a UK probate specialist and a French notaire who are actively working together on the cross-border specifics, rather than relying on either side's rules in isolation.
What to Consider in the Meantime
None of this changes anything before April 2027, and spousal transfers remain protected regardless. For non-spousal beneficiaries, some cross-border families are looking at Assurance Vie as an alternative wealth-transfer vehicle for exactly this reason — it runs under its own well-established French succession regime (up to €152,500 tax-free per named beneficiary) rather than colliding with a still-unsettled cross-border pension question. The French Wealth Tax (IFI) guide also covers how Assurance Vie contracts sit outside IFI entirely, making them doubly useful for those with significant French property exposure.
Frequently Asked Questions
Is the UK pension inheritance tax reform definitely happening?
Yes. It's confirmed under the Finance Act 2026, which received Royal Assent in March 2026, and takes effect for deaths on or after 6 April 2027. It's no longer a proposal or draft.
Does this affect me if I'm a French resident with a UK pension?
Potentially, in a more complicated way than it affects UK residents. Your pension could be pulled into the UK estate under the new rules based on your own UK domicile status, while separately being liable to French succession tax if your heirs are French tax residents — the interaction between the two is not yet a settled area.
Will the UK-France estate tax treaty stop me being taxed twice?
The treaty provides a credit mechanism for double taxation generally, but it was built around the UK's old domicile concept, which the UK replaced with a residence-based test in April 2025. How this applies to a UK pension specifically hasn't been tested yet, since pensions have never been part of a UK estate before now.
Do I need to do anything before April 2027?
Not urgently, but if a significant UK pension forms a large part of your estate and your heirs are French tax residents, it's worth raising with both a UK probate specialist and a French notaire now, rather than waiting until the rules take effect.
Are spouses affected by this reform?
No. Transfers to a surviving spouse or civil partner remain fully exempt from UK inheritance tax under the new rules, exactly as they are today.
Is Assurance Vie a way around this problem?
It's one option some cross-border families are considering, since Assurance Vie runs under its own established French succession rules rather than the still-unresolved UK pension question. It's a planning decision with its own trade-offs, not a like-for-like substitute — see our SIPPs vs Assurance Vie guide for the fuller comparison.